Normally, I don’t think Zeke Emanuel has much to say that is both true and interesting. But this insider’s view of the making of ObamaCare is fascinating. Apparently there were people inside the White House who wanted to adopt John McCain’s approach to health reform. We ended up with only a timid step in that direction ― mainly so the president could save face after all the demagogic ads he ran attacking McCain during the campaign:

In 1954, the Internal Revenue Service created a tax exclusion for health insurance premiums, which is why health benefits offered through an employer aren’t subject to income or payroll taxes. This makes an additional dollar of health insurance (which isn’t taxed) more valuable than an additional dollar of wages (which is).

Economists — liberal and conservative alike — overwhelmingly denounce the tax exclusion. It drives costs higher while keeping wages down, it is regressive, and it is a major drag on the federal budget — lowering revenue by a whopping $250 billion a year.

During the 2008 presidential campaign, Senator John McCain proposed eliminating the exclusion and replacing it with a $5,000 tax credit to help families buy health insurance. The Obama campaign ran more than $100 million worth of ads pounding McCain, accusing the GOP nominee of “taxing health benefits for the first time ever.”

Once Obama was in office, his advisers split on the issue. The economists wanted to limit the exclusion, but the political team didn’t want to touch it. David Axelrod, the president’s political guru, even showed us a montage of Obama’s campaign commercials to remind the economic team of his stated position. The president himself repeatedly insisted on the principle of fidelity: Campaign promises weren’t to be contravened without a very good policy rationale.

One Friday in July 2009, the president made a surprise appearance at a meeting of key health-care advisers. When the discussion moved from pleasantries to substance, I argued for limiting the tax exclusion. Obama already understood that this would raise revenue to fund the expanded coverage, but that wasn’t reason enough to change his position. So I tried a different argument. If reform was to succeed, it had to control rising health-care costs, which threatened to overwhelm the economy. Limiting the tax exclusion, I argued, was the most powerful lever the president had to control costs on the private side.

Ultimately, Obama authorized a new tax-exclusion policy despite the heartburn he knew it would cause his political base — particularly labor unions. We proposed a tax on high-cost “Cadillac plans,” which will begin in 2018. Reversing a campaign position took a lot of guts, but this was good policy, and the president showed leadership in endorsing it.

This post relates to the previous one in which you compared social engineering with economists. Obama based his campaign on things that social engineers believed to be the best solution, but the economist believed that the reform should be handled differently. He followed the guidance of the utopic social engineers and ignored the realism portrayed by the economists. That is why ACA is a program that hasn’t been implemented fully, a flawed reform that has created more issues than it has solved.

This is what I don’t like about politics. Elected officials (regardless of party, position, etc.) act in ways that contradict the people’s best interests. They do things that they know contradict public interest but are things that will yield a significant political gain. The problem is that people never stand up to them, they let the politicians do whatever they want, and they always end up being reelected.

It makes it worse when these politicians act against the best interest of the people and when the people realize it they end up changing their proposals. What angers me is that when they change their actions, they are hailed as saviors, ignoring that it was them in the first place who caused these issues.

Correct, politicians want power, but no one is more powerful than the people. Politicians are elected to act according to the people’s will, if they are not doing it, the people can remove them from office. The people shouldn’t fear their government; the government should fear the people. And Obama’s change in attitude is an example of this. He modified the reform when the people were complaining that the reform was going to leave them worse off.
“The voice of the people is the voice of God.”

So we are cataloguing doing what we have to do as having leadership? Why say that he is a leader when he was determined to do whatever he wanted to do? Why say that is a courageous act, when he changed his beliefs to benefit his party in the upcoming elections? He is not being a leader; he is being a politician, a fairly good one.

The Democratic Party spent millions in defeating McCain, campaigning against his proposed healthcare reform and they ended up having to borrow some key points form the Republicans to be able to make their reform work. This shows the administration ambivalence, during the campaign McCain’s ideas were harmful, but when action was needed, it turned out that they weren’t that bad. This is the problem with negative campaigns, that you will end up having to swallow your own words.

Agree. If we don’t change the system will not change. If we keep electing the same representatives we will not see the change that we hope for. Where political machinery is strong, the people’s will must be stronger to achieve what they desire.

I said (and half expected) after the 2008 campaign that Obama could invite McCain over to the White House to hammer out a compromise health reform. Their positions were not all that different. Orszag and Holtz-Eakin (both former CBO directors) could have gotten it done in a week. It would have been presented to Congress as the first item of business in Jan, 2009 and enacted by overwhelming majorities of both parties by June of that year.

I’m not sure I would have been thrilled with the result, but imagine how different the politics would have been. Obama had a chance to unite the country and heal the divisions. Instead he chose to do the opposite.

He preferred to steal the spotlight. He wanted to be the president that led the change, the one who broke with the ties of the old traditional politics that were harming the economy. He believed he had all the answers, so instead of relying in the opposition he fueled the division and made of the congress floor a war. The president’s ambition to change how politics work made him lose his opportunity to change it. He could have change the world, but his ego was his obstacle.

The way I read this anecdote, Obama considered limiting the tax exclusion purely as a revenue raiser. If a family was over 400% of poverty and enjoyed a generous employer plan, they would pay higher taxes but NOT get an offsetting tax credit.

The McCain plan was revenue neutral. A family that received an $18,000 employer premium would take $18,000 into income, which raised their taxes by $5,000, but then they would have $5000 credit and come out whole.

The flip side is that “if you like your insurance you can keep it” would not apply to the McCain plan either, at least with respect to employer-sponsored plans. Replacing the tax exclusion for HIPAA-compliant group plans with a tax credit for any coverage would have caused most employer plans to fold within a year or two.

Whether that’s a good thing or not is a matter of opinion, but it was a heavy burden to place on a presidential campaign.